Mr/Mrs [Full Name] [Address Line 1] [Address Line 2] [Postcode]
Date: [Insert Date]
For the attention of my Executors – [Names]
Having reviewed my income and expenditure, I confirm that my income regularly exceeds my normal living expenses. It is my intention to make regular gifts from this surplus income to the beneficiaries named below and to continue doing so until further notice.
Beneficiary
Amount
Frequency
[Name]
£[Amount]
[Monthly/Quarterly/Six-Monthly/Annually]
[Name]
£[Amount]
[Monthly/Quarterly/Six-Monthly/Annually]
Optional paragraphs – include those that apply
1. General direct gifting (no savings accumulation): These gifts are made directly from my income, which is paid into my current account. The transfers to the beneficiaries are made from that account on a regular basis and represent part of my normal expenditure out of income.
2. Using a savings account to accumulate surplus income: My surplus income is paid into my savings account (account number [XXXXXXX]), where it may accumulate before being distributed. The purpose of this accumulation is to manage cash flow and timing of gifts – for example, I may build up approximately £[XX,XXX] of surplus income over several months and then make gifts totalling around £[XX,XXX] from that same account.
3. School or university fees: It is my intention to use part of my surplus income to assist with my grandchildren’s [school/university] fees. Payments will be made [monthly/termly/annually] directly to the relevant school or to their parents to cover these educational costs. These payments are made from my income and do not affect my usual standard of living.
4. Family holidays: I intend to use part of my surplus income to fund annual family holidays, paying directly for accommodation and travel or reimbursing family members for these shared expenses. These payments form part of my normal expenditure out of income and are intended to be regular while my income continues to exceed my expenditure.
5. Mortgage support: It is my intention to use part of my surplus income to assist [name(s)] with their mortgage payments. These gifts will be made [monthly/quarterly/annually] from my income and are expected to continue for the foreseeable future. They are affordable within my income and do not affect my standard of living.
I confirm that these gifts are made from income rather than capital. I have reviewed my income and expenditure and confirm that making these gifts will not affect my usual standard of living. Supporting records of my income and expenditure are retained to assist my executors in demonstrating to HMRC that these gifts represent normal expenditure out of income.
We all know about the £3,000 annual gift allowance – which, let’s be honest, barely covers a family Christmas these days. But there’s another inheritance tax (IHT) rule that’s a bit of a hidden gem: the “normal expenditure out of income” exemption.
In short, if your income comfortably exceeds what you spend, you can give away the surplus – regularly – and it’s immediately free of IHT. No seven-year rule. No complex trusts. Just good records and a clear intention.
Why would you do this?
Because for many people, especially those with healthy savings and investments, the income just keeps coming. Dividends, pensions, interest, rental income – it all adds up, and the estate quietly grows year on year.
You don’t notice it until one day your ISA statements look smug, your savings account balance starts with a “3” (and not the good kind, if you’re thinking in six figures), and suddenly your estate’s well into IHT territory.
But if you’re happy that your capital already provides the comfort you need, why not use the income it generates to do something nice – like:
Help the kids with their mortgages before they start thinking “generation rent” might apply to everyone;
Pay the grandchildren’s school or uni fees while you’re around to enjoy the gratitude (or at least the occasional text);
Fund the family holidays so everyone remembers you for the cocktails, not the tax bill.
The key is that it’s “normal” and from income
HMRC aren’t unreasonable – they just want to see that you meant to make these gifts regularly, that they came from income, and that you weren’t depriving yourself of Ferrero Rocher to do it.
A simple Letter of Intention does the job. Even if you save the income for a few months first (say, build up £20,000 and gift £10,000 twice a year), you’re fine – as long as you document it properly.
But be careful what counts as “income”
Not everything that lands in your account qualifies. “Income” means things like pensions, dividends, bank or bond interest, rental income, or regular drawings from a business. It does not include the sale or withdrawal of savings or investments.
So, for example:
If your £20,000 ISA or Savings Bond hits its one-year anniversary and earns £800 of interest, that £800 is income you can gift tax-free. But the £20,000 you originally invested is capital – and gifting that would fall under the normal seven-year rule.
Similarly, if you sell shares, cash in Premium Bonds, or move money from an old savings pot, that’s capital, not income.
The idea is simple: you can give away the fruit, but not the tree.
We’ve made that bit easy – you can grab our template “Letter of Intention – Gifts Out of Income” here:
If you’re not sure how it fits with your own finances – or if you’re worried your estate’s sneaking over the IHT threshold faster than you can say “frozen allowances” – give us a shout. We can help you work out what’s sensible, sustainable, and most importantly, tax-efficient.
For many people, the word “trust” sounds a bit serious — the sort of thing that comes with a stack of paperwork, a stiff brew, and someone saying “now don’t panic, but…”. In reality, trusts are tucked away in all sorts of everyday financial bits and pieces, which means you’re probably already part of one without knowing it. Half the time, folk have been “in a trust” for years without ever filling anything in, signing anything dramatic, or putting on owt smarter than their normal jumper.
If you’ve got a pension, life insurance, joint property, or even a few investment funds, then congratulations — you’re already part of a trust.
So what actually is a trust?
What Is a Trust?
Think of a trust as a safety box for assets — like money, property, or investments — where one person (the trustee) looks after what’s inside on behalf of someone else (the beneficiary).
The person who sets it up (the settlor) decides the rules: who benefits, when, and how. Once the assets are in the box, they legally belong to the trust, not the person who put them there. That’s what makes them useful — for protecting family, managing inheritance, or simply keeping things organised.
It’s not about being rich or secretive. It’s about structure and protection.
Where You’ll Find Trusts (Without Realising It)
1. Your Pension
Every workplace or private pension sits inside a trust. The trustees hold and invest the money for your benefit. That’s why your pension is safe even if your employer folds — the assets belong to the pension trust, not the company.
2. Life Insurance Policies
Many life insurance policies are written in trust so that the payout goes straight to your loved ones, avoiding probate delays and, in many cases, inheritance tax.
For example, imagine a £100,000 life policy. If it isn’t in trust, the payout goes into your estate when you die — and could add another £40,000 to your inheritance tax bill. If it is properly written in trust, the whole £100,000 goes directly to your named beneficiaries — quickly, tax-free, and without waiting for probate.
What often surprises people is that policies are not automatically written in trust. This is particularly common with policies bought on a non-advised basis — for example, those purchased online through comparison sites, supermarket-branded insurance portals, or “quick quote” providers where you answer a handful of questions and click “buy now”. These policies are convenient, but they usually don’t prompt you to complete a trust form, which means the payout defaults into your estate unless you take further action.
Important note: Most trusts, including life insurance trusts, now need to be registered with HMRC’s Trust Registration Service — even if the trust isn’t paying any tax. This catches many people out, so if you’ve set up a life insurance trust, make sure it’s been properly registered.
3. Property You Own Jointly
People often say, “We own the house jointly”, but that phrase can mean two very different things — and it really matters which one applies to you.
If you own your home as joint tenants, the legal structure works like a trust behind the scenes. When one of you dies, the property automatically passes to the survivor, no matter what the will says. That’s because of the right of survivorship — the ownership is blended together.
If you own as tenants in common, it’s a completely different setup. Each of you owns a distinct share, and you can leave your share to whomever you wish in your will — a spouse, child, or anyone else.
It’s the same property, but the way it’s legally held makes a huge difference to what happens next. And this doesn’t just apply to your home — all land and property ownership works the same way behind the scenes. Should I stay or should I go? (The Clash) — well, that depends on how the title’s held.
4. Investment Funds
When you invest in a fund — such as a unit trust — your money joins thousands of others in a big pot legally held under a trust. You’re a beneficiary, and the fund manager is effectively the trustee, investing that pooled money on your behalf. Money, money, money (ABBA) — all sitting in a trust wrapper.
5. Family and Inheritance Planning
This is where people think trusts start, but it’s just one area. Parents and grandparents often use trusts to:
Save money for children or grandchildren
Let a spouse stay in the family home for life while keeping it for the kids long term
Protect vulnerable family members or control when someone receives their inheritance
A word of caution if you’re considering a bare trust for children: while these are simple and tax-efficient, beneficiaries get absolute entitlement at age 18 (in England and Wales). That means your carefully saved nest egg could legally go towards a gap year in Ibiza rather than a house deposit — something to bear in mind before you set one up.
6. Charitable and Special Purpose Trusts
Charities are nearly always structured as trusts. There are also special-purpose versions, like those set up to look after a family grave or pay for the upkeep of a village clock tower.
Can You Change Your Mind? (Revocable vs Irrevocable Trusts)
One of the biggest sticking points when people first consider using a trust is control — the moment you give something away, do you lose it forever?
A revocable trust is one you can change or undo later. You’re still in control of the assets and can take them back if your circumstances or plans change. These are rare in the UK because HMRC tends to ignore them for tax purposes — if you can get the assets back, they’re still treated as yours.
Most UK trusts are irrevocable, meaning once you’ve placed assets into the trust, you can’t simply pull them back out or rewrite the rules. You’ve given them away — legally speaking — even though trustees manage them for the benefit of the people you’ve chosen.
That might sound scary, but it’s also the point: if the assets no longer belong to you, they’re outside your estate for inheritance tax, protected from remarriage, creditors, or care costs. The trust becomes its own legal “wrapper”, with its own life separate from yours. You can’t always get what you want (The Rolling Stones), but sometimes what you need is that permanent separation.
The Tax Side of Trusts
Once you understand how trusts work, the next question is always the same: “How does the tax work?”
There are really four stages to think about — getting stuff into the trust, what happens while it’s in there, what happens when assets or money come out again, and the inheritance tax position throughout.
Stage 1: Getting Stuff Into the Trust
When people hear that trusts can be “taxed”, they often assume that simply putting something into a trust automatically triggers a big tax bill. That’s not true — it depends entirely on what kind of trust it is and why it exists.
Your Pension – Putting money into your pension is technically putting money into a trust, and far from creating a tax charge, it actually reduces your tax bill. You get tax relief now, and the tax only comes later when you draw the money out.
Life Insurance – Setting up a life policy in trust doesn’t create a tax bill either. You’re not transferring existing wealth; you’re creating a future payout that will go straight to your beneficiaries.
Joint Property – Owning your home as joint tenants already creates a trust-like structure between you and your co-owner, but again, there’s no tax event at that point.
Investment Funds – Investing in a unit trust doesn’t trigger a tax charge when you buy in — you’re just joining an existing pooled trust structure managed by professionals.
Family and Discretionary (Flexible) Trusts – Now this is where the tax story changes. When you set up a new trust to give away existing assets — like a rental property, shares, or an investment portfolio — you’re not just being generous. In the eyes of HMRC, you’re effectively selling those assets at their market value, even if no money actually changes hands.
HMRC doesn’t recognise a “free gift.” It says, “Fine — you’ve given it away, but we’ll treat it as though you sold it for what it’s worth today.”
That means:
Capital Gains Tax (CGT): you’re taxed as if you’d sold the asset at its market value. If it’s gone up in value, there’s a gain to account for. Holdover relief can sometimes defer this tax, but it only applies to certain types of trusts (mainly discretionary trusts and trusts for disabled beneficiaries), and it has to be actively claimed.
Inheritance Tax (IHT): the value of what you’ve given away counts towards your lifetime allowance (the nil-rate band). Go over that, and there can be a 20% lifetime IHT charge.
A good way to think about it is to imagine you actually sold the property at full market price, and then immediately used the proceeds to set up the trust.
Ask yourself:
What taxes and selling costs would I face as the seller?
What costs, tax, or stamp duty would I face as the buyer (the trust or the trustees)?
Those combined costs are what come out of the overall “pot” when assets move into trust.
Stage 2: What Happens In the Middle
Once the assets are sitting inside the trust, three things usually happen: they’re protected, they grow, and they (hopefully) earn some income.
That protection piece is one of the biggest benefits — assets inside a trust can be sheltered from future claims, divorce, or simply from being spent too quickly. But while the protection stays constant, the way growth and income are taxed depends entirely on the type of trust you’re dealing with.
Inside a Pension – If those same assets — cash, property, shares — are sitting inside a pension trust, the growth is tax-free. A rental property held within a pension doesn’t pay tax on its rent or on any increase in value. You only pay tax when you draw the money out, not while it’s growing.
Inside a Family or Flexible Trust – Now imagine those same assets held in a family trust. Here, the tax treatment changes completely.
Any income the trust earns — rent, dividends, or interest — is taxed each year, usually at higher rates than individuals pay. And when the trustees sell something that’s gone up in value, they can face Capital Gains Tax.
There’s also the so-called ten-year charge, a small inheritance tax check-in every decade to make sure the trust isn’t quietly building a fortune outside the tax net. The maximum rate is 6%, but in practice it’s usually much lower — often around 1-2% depending on when the charge occurs and the trust’s history.
So while assets in a pension can grow completely tax-free, assets in a flexible or family trust grow within a taxable “wrapper”. They still enjoy the benefit of protection and controlled ownership, but they need active management to stay tax-efficient.
Stage 3: Getting Stuff Out of the Trust
At some point, what’s in the trust usually comes out — whether that’s money paid to you from your pension, a life insurance payout to your family, or assets being passed on from a family trust.
Pensions – the delayed tax bill
You got tax relief on the way in, enjoyed tax-free growth while it sat in the pot, and now the bill lands when you take the money out.
Normally, 25% of your pension pot can be taken tax-free. The rest is taxed as income when you draw it — but often at lower rates if you take it gradually in retirement.
If you die before touching your pension, the tax treatment for your beneficiaries depends on your age at death:
Die before age 75: beneficiaries can usually draw the funds tax-free
Die after age 75: beneficiaries pay income tax on withdrawals at their own marginal rate
Life Insurance – the clean payout
If your life policy was written in trust, the payout goes straight to your beneficiaries without going through your estate. That means no probate delay and, usually, no inheritance tax. The beneficiaries simply receive the money — no income tax, no capital gains tax.
Family or Flexible Trusts – the managed handover
This is where things get more involved. When trustees start paying out money or assets, HMRC takes another look.
If the trust sells an asset to make a cash payment, there might be Capital Gains Tax on the sale.
If the payment represents income, it’s already been taxed once in the trust, but the beneficiary may still need to include it on their tax return — often with a credit for the tax the trust has already paid.
If the assets themselves are handed over (say, a property or shares), there can be Capital Gains Tax again, though holdover relief may allow the gain to pass to the beneficiary instead of being paid immediately (again, only for qualifying trusts).
Some trusts face a small exit charge for inheritance tax when assets come out — usually only a few percent and often avoidable with good timing and advice.
Stage 4: Inheritance Tax – Who’s in the Firing Line?
If there’s one thing that links every type of trust, it’s the way the inheritance tax rules follow the settlor — the person who puts the money or assets in — long after they’ve given them away.
Pensions – usually outside your estate (but changes are coming)
One of the biggest advantages of pensions is that, for inheritance tax, they currently sit outside your estate. Your beneficiaries inherit directly based on your expression of wishes, normally without any inheritance tax to pay. The only tax they may face is income tax when they withdraw funds, depending on your age at death (as explained earlier).
However, the landscape is shifting. From April 2027, new rules will apply to pension death benefits. The broad direction of travel has been announced, but the detailed legislation isn’t finalised yet. The intention is to bring certain larger, largely untouched pension pots more clearly within the inheritance tax framework. We don’t yet know exactly how far these changes will reach, so it’s an area to keep under review as the rules develop.
Life Insurance – outside your estate if written in trust
A life policy written in trust sits outside your estate. If it’s not in trust, the payout can add 40% to your IHT bill.
Jointly Owned Property – depends how it’s held
For couples owning their home as joint tenants, the property automatically passes to the surviving partner — so no IHT is triggered on first death (it’s covered by the spouse exemption).
But if your spouse is no longer your spouse — for example, you’re separated or divorced but still own the property as joint tenants — it still passes automatically on death, and the former partner could end up inheriting everything.
Family or Flexible Trusts – where the clocks start ticking
When you place assets into a trust, HMRC treats it as a chargeable lifetime transfer. If the total of gifts in the previous 7 years plus the new one is under your nil-rate band, there’s no tax. Go over that, and there’s a 20% lifetime IHT charge.
Here’s where it gets a bit complex: when you make a new gift or transfer into trust, HMRC looks back 7 years to see if you made any other gifts that used up some of your nil-rate band. This means that theoretically, a gift made today could be affected by gifts made up to 14 years ago (if you made a gift 7 years ago, and that gift was assessed by looking back another 7 years). It’s not quite a “14-year lookback” — more like a rolling 7-year window that can create a chain effect.
Once assets have been in trust for 7 years (and you don’t benefit from them), they’re outside your estate for IHT. The trust itself then faces small ten-year and exit charges instead.
Beneficiaries – what they actually inherit
Beneficiaries generally don’t pay IHT when they receive money or assets from a trust — the tax is handled earlier, when assets go in or during the trust’s life.
For pensions and life insurance, there’s usually no IHT at all, but income tax may apply when funds are drawn.
When Trusts Aren’t the Answer
It’s worth remembering that trusts aren’t always the right solution. They come with ongoing responsibilities: someone has to act as trustee, manage the assets, file tax returns, keep records, and make decisions about distributions. That’s a real commitment, and it comes with legal responsibilities too.
Trustees can be personally liable if they get things wrong, so taking on the role isn’t something to do lightly. Many people appoint professional trustees for peace of mind, but that adds to the cost.
Sometimes, simpler solutions work better — a well-drafted will, clear beneficiary nominations, or just gifting money directly. The key is understanding what you’re trying to achieve and whether a trust is genuinely the best tool for the job. After all, every little thing (Bob Marley) doesn’t need a trust wrapper — sometimes simple really is better.
Trust Jargon – Decoded
There’s no escaping it — trusts come with their own language. Here’s a quick guide to the key terms you’ll bump into:
Term
What It Means
In Plain English
Settlor
The person who sets up the trust and puts assets in
The one who starts the ball rolling
Trustee(s)
The people who legally hold and manage the assets
The caretakers
Beneficiary/Beneficiaries
The people who benefit from the trust
The ones the money’s meant for
Discretionary Trust
Trustees decide who gets what and when
A “flexible” trust — no one has a fixed entitlement
Bare Trust
Beneficiaries own the assets outright but trustees hold them until they’re ready
Often used for children (who get it at 18)
Interest in Possession Trust
Someone has a right to income from the trust for life
“You get the income, not the capital”
Chargeable Lifetime Transfer (CLT)
A lifetime gift that might trigger IHT
A taxable gift made while you’re alive
Potentially Exempt Transfer (PET)
A gift that becomes exempt from IHT if you survive 7 years
A gift that’s fine… as long as you live long enough!
Holdover Relief
Defers CGT on transfers into or out of certain trusts
“Kick the CGT can down the road” (only for qualifying trusts)
Ten-Year Charge
Small IHT charge (up to 6%, usually less) every 10 years on some trusts
HMRC’s “check-in”
Expression of Wishes
A note to your pension trustees saying who should benefit
Your instruction letter
The Takeaway
Trusts are everywhere — in your pension, your home, your life insurance, even your investments.
The key is to recognise the trusts you already have, and think about whether there are other places where a trust could work for you — like making sure your life insurance is written in trust, or deciding whether your will should create one to protect loved ones after you’re gone.
Remember, though, a trust doesn’t run itself. Someone has to manage it, file the tax returns, and make decisions about distributions. And most trusts now need to be registered with HMRC, even if there’s no tax to pay.
That’s why setting up a trust — or deciding not to — should never be done in isolation.
Good planning means looking at your whole picture — your age, wealth, relationships, goals, and future plans. The right trust (or none at all) depends on you.
So here’s what to do next:
Check whether your life insurance is written in trust (and if it is, whether it’s been registered)
Review your pension’s expression of wishes — is it up to date?
If you own property jointly, confirm whether you’re joint tenants or tenants in common
Consider whether any existing family trusts are still doing what you intended
So before you jump in, make sure you understand the ones already around you — and get advice that looks at the full context, not just the word “trust”.
And in the End…
Trusts can look complicated — but like most things in life, once you strip out the jargon, they’re just about people, protection, and planning ahead.
They’re the unsung heroes quietly working in the background of your pension, your home, and your insurance policy. The real trick is knowing when to use one on purpose — and when you already have one without realising.
So take a little time to check what’s sitting in your own “trust box”, and whether it’s working the way it should.
Because when it comes to your future — and your family’s — you’ve got to have faith (George Michael), make sure you don’t stop believin’ (Journey), and remember that good planning is all about trusting the process (Drake).
If you thought Companies House was just about sleepy annual filings and the odd company search, think again. They’re shaking things up in a big way, and this time it affects you – yes, every director and every person with significant control (PSC).
From 18 November 2025, each director and PSC must have their identity verified and be issued with a unique personal ID code (or as we like to call it, your “magic number”).
A bit like the company authentication code you’ve already got, but this one’s personal – it belongs to you as a person, not the company. And the good news? Once you’ve got it, you keep it for life. One magic number, forever.
Why is this happening?
Because Companies House wants to make sure that the people listed as directors and PSCs are real, verified individuals. No more hiding behind smoke and mirrors.
What does it mean for you?
Here’s the short version:
You won’t be able to file a confirmation statement after 18 November without including every director’s ID code.
PSCs need one too (if you’re both a director and PSC, it’s the same code – no double trouble).
Without the code, your company could get stuck and face penalties because filings can’t be made.
Verify your ID (passport or driving licence + a quick selfie video).
Get your personal 11-character code.
Send it to us, just like you would with your company auth code.
Deadline alert:
We need all director and PSC codes in our hands by 18 November 2025. Please don’t leave it until the week before – if the system glitches or your passport’s out of date, it’ll be a nightmare.
Think of it this way: this is like renewing your driving licence. You don’t think about it until the expiry date looms, and then suddenly you’re grounded. We don’t want your company filings grounded – so let’s get it sorted now.
We’ll be chasing for your codes soon, but if you’re super organised, why not beat the rush and send yours over once you’ve got it?
What about new companies?
If you’re planning to set up a brand-new company after 18 November, the rules bite straight away.
Every director must be verified and have their personal ID code before the company can even be registered.
If someone is also a PSC, the same rule applies.
No codes = no incorporation.
In other words, if you’re appointing directors for a shiny new company, they’ll need to sort their ID verification first. So if you’ve got plans to incorporate, let’s get those “magic numbers” sorted early to avoid any hold-ups.
Did you know? One code covers all your companies
If you’re a director (or PSC) of more than one company, don’t panic – you only need to do the ID check once. Companies House gives you a single personal code that you’ll use for every directorship and PSC role you hold.
That means if you’re a director of three companies (and a PSC in two of them), you still only get one “magic number”. Just make sure you give us that code for each company we look after for you, so we can keep everything compliant.
As we continue our series on planning for life’s “what ifs”, there’s one family member we couldn’t possibly overlook — the one who never answers back, always listens, and greets you like a celebrity every time you walk through the door.
Your pet.
For many of us, pets are more than companions. They’re part of the family — loyal, loving, and constant. Yet when it comes to wills and future planning, they’re often forgotten. It’s easy to assume that someone will “just take them,” but the reality is rarely that simple.
Could your 90-year-old Aunt Mabel really take on a lively border collie that never stops running? Would your sister be able (or willing) to fund the endless appetite of a Labrador who never says no to seconds?
And what happens if circumstances change — a hospital stay, a family breakup, or a house move that turns life upside down?
These are the moments when good intentions meet real-world complications.
That’s why we were pleased to discover PetPact, a thoughtful initiative from local firm Roche Legal. It’s designed to help pet owners make clear, legally-informed arrangements for their animals — ensuring their welfare and your peace of mind.
A PetPact provides: • A legally informed, personalised Letter of Wishes for pet care • Guidance for both emergency and long-term care situations • Peace of mind that your pet’s future is properly planned • And, as a lovely touch, a £5 donation to UK animal charities with every PetPact
You can find out more about it here: Roche Legal – PetPact
Why This Matters
Under UK law, pets are treated as personal property. That means they can’t directly inherit money — but you can leave instructions about who should care for them, and you can set aside funds for their upkeep. This can be done in your will itself or, more flexibly, through a Letter of Wishes such as the one created under a PetPact.
Making these arrangements now avoids confusion later, helps prevent disagreements between relatives, and ensures that your pet isn’t left without a clear home or plan. It’s one of those small steps that can make a huge difference — both to the animal and to those who love it.
Ask any couple whose money it is, and you’ll probably get three answers:
“Ours.”
“Mine.”
“Whichever account has the better online banking app this week.”
For day-to-day life, that works fine. But when it comes to Inheritance Tax, HMRC is far less romantic — they like things labelled neatly as “his” or “hers.”
Whose account does the gift come from?
For IHT purposes, the name on the account or investment matters. If it’s in Mr’s name, then the gift is his — even if he only got the money there because Mrs let him “borrow” it. A joint account is usually treated as 50/50, unless you can show otherwise.
Why does this matter?
Because gifts eat into your £325,000 nil-rate band, and HMRC want to know who’s been doing the giving. In practice, they don’t mind if one spouse transfers from “the easy-to-log-into account,” so long as you keep your records straight and consistent.
What about gifts out of surplus income?
Here’s where the rules tighten up. The exemption for “normal expenditure out of income” only works if the gifts come from the income of the person making them. HMRC aren’t interested in the theory of joint money — they want to see whose payslip (or pension statement) the money came from.
A simple example
Mr earns £70,000 a year. Mrs earns £10,000. Together they give their children £10,000 every Christmas.
If the gift is from Mr, it can fall under the surplus income exemption — plenty of headroom.
If it’s from Mrs, it won’t qualify — her income doesn’t stretch that far.
If it’s from a joint account, HMRC will usually say £5,000 each. That means only half could qualify for the exemption.
So what should couples do?
Keep a record of gifts — who gave what, when, and from which account.
Be consistent in how you describe “joint” gifts.
If you’re relying on the surplus income exemption, make sure the paper trail points to the right spouse.
In short: while most couples happily treat money as “ours,” HMRC prefer it as “his and hers.” A bit of careful planning (and record-keeping) stops it becoming a headache — and saves the arguments over whose turn it was to pay anyway!
When there’s no will, the person handling the estate is called the Administrator. Their job: sort the mess, stay sane, and avoid personal liability.
Step 1: Establish Your Right to Act
Only certain relatives can apply for Letters of Administration — following the same order as the intestacy rules. If more than one person qualifies, they can apply jointly or nominate one administrator.
Step 2: Identify Who Might Inherit
Build a family tree and confirm relationships with birth and marriage certificates. Where there are gaps (unknown siblings, long-lost children), you’re expected to make reasonable enquiries.
Step 3: Protect Yourself – Section 27 Notices
Under the Trustee Act 1925, Section 27, administrators can publish a public notice:
Once in The Gazette (official record).
Once in a local newspaper.
The notice invites creditors or potential heirs to make claims within two months. If no one responds, you can safely distribute the estate without personal liability — even if someone emerges later.
Step 4: Use Professionals Where Needed
Probate genealogists (or “heir hunters”) can confirm the family tree and find missing relatives.
Missing Beneficiary Insurance covers you if someone later appears with a valid claim.
Costs come from the estate — not your own pocket.
Step 5: The DNA Curveball
With millions on DNA databases, it’s entirely plausible that an “illegitimate” or previously unknown child appears years later. If they can legally prove parentage, they have a claim — but if you’ve placed your Section 27 notices and acted reasonably, you’re personally protected.
Step 6: The Practical Checklist
Apply for Letters of Administration.
Verify the family tree.
Publish Section 27 notices.
Wait two months.
Consider genealogists or insurance for complex estates.
Only then, distribute the estate.
Step 7: If You Skip the Steps
Fail to advertise or investigate properly, and you could face a claim years later — with personal liability. Even worse, you’ll have to explain to your siblings why their inheritance just evaporated.
Being an Administrator isn’t a title anyone wants, but it’s a vital one. Do it properly, and you can sleep at night. Skip the formalities, and you’ll be haunted not by ghosts — but by lawyers.
When the law divides an estate, it flows down the family tree like water — each generation taking its share, unless that branch has died out, in which case the share trickles down further.
Basic Principle: “Per Stirpes”
If a child of the deceased has already died, their own children inherit that child’s share.
Example:
Sarah dies, leaving two children: John (alive) and Kate (who died years ago but had two kids, Ben and Lily).
John gets 50%.
Ben and Lily each get 25% (Kate’s half, split between them).
Next Layers of the Tree
If there are no children or grandchildren:
Parents inherit next.
If they’re gone, the estate moves sideways to siblings.
If siblings are dead, their children inherit their shares. And so it goes — down each line before moving sideways.
Modern Complications
DNA testing is rewriting family trees. An unknown half-sibling discovered through a home kit could suddenly have a claim, provided they can legally prove parentage. Intestacy doesn’t care if you’ve never met — bloodline wins.
Example
Arthur dies with no will. He thought he had one daughter, but a DNA test later confirms he has a second child from a long-ago relationship.
Result: both daughters share the estate equally.
The daughter who handled the estate must reopen it and redistribute funds — unless she protected herself properly.
Stepchildren & Partners
They don’t inherit automatically — unless adopted or specifically included in a valid will. A sobering thought for blended families.
Moral
Family trees grow in unpredictable directions. If you want to choose who gets what, write it down while you still can. Otherwise, the law — and possibly a stranger with a DNA kit — will decide for you.
When there’s no will, the estate is distributed under the Rules of Intestacy — a set of laws last updated by people who clearly hadn’t spent Christmas with your family.
How It Works
The estate passes in a fixed order:
Spouse or civil partner
If there are no children, they get everything.
If there are children:
The spouse gets all personal belongings.
The first £322,000 of the estate.
Half of what’s left.
The children share the other half equally.
No spouse or civil partner? Then it goes to:
Children → grandchildren → great-grandchildren (each branch inheriting “per stirpes”).
If no descendants: parents → siblings → half-siblings → grandparents → aunts/uncles → half-aunts/uncles.
If absolutely nobody qualifies, the estate passes to the Crown as bona vacantia.
Who Gets Nothing
Unmarried partners (even if you’ve lived together for decades)
Stepchildren (unless formally adopted)
Friends, carers, or charities
Real-World Chaos
Imagine David dies leaving his partner of 25 years, Sue. They never married, and his house was in his name. His children from a first marriage inherit everything. Sue, who helped pay the mortgage, gets nothing — except a phone call from the estate agents asking when she’ll be out.
The Administrative Bit
Someone must apply for Letters of Administration — usually the next of kin. They’ll handle all assets, pay debts, and distribute the estate. It’s like being executor, but without the helpful guidance of a will.
Why It Matters
The intestacy rules don’t care what was “promised” or “understood.” So, the moral is simple: make a will. Even a basic one beats leaving your family to interpret 100-year-old legislation.
If you think having a will automatically means you’ll avoid family chaos — think again. A will only helps if someone can actually find it. And since there’s no official “will database” in the UK, the search can quickly turn into a legal version of hide-and-seek.
Step 1: The DIY Detective Work
Start simple. Check:
Any folder, envelope, or safe marked “important.”
Solicitors, accountants or financial advisers the deceased might have used.
The bank — some still hold wills, especially older ones.
Family members — occasionally someone was handed the “safe copy” 20 years ago and forgot.
Step 2: Local Solicitors and Successor Firms
If you can’t find a physical copy, contact local firms in the area where the will was likely made. Even if the original firm has merged or closed, the successor firm usually keeps archived wills. You can search successor details using the Law Society’s “Find a Solicitor” tool.
Step 3: The National Will Register
If detective work fails, it’s time for technology. The National Will Register (formerly Certainty) can search for registered wills and contact solicitors to check their archives.
Basic Will Register Search – £65 (checks registered wills only)
Will Search Combined – £140 (adds unregistered will searches and firm outreach)
While not every solicitor registers wills, it’s the UK’s largest database and often the quickest route to an answer.
Step 4: Search the Probate Records
If you’re checking after death, search the government’s probate database: www.gov.uk/search-will-probate For £1.50, you can download any will that’s already been through probate.
Step 5: When There’s Truly No Sign
If all else fails, you may have to proceed as though there’s no will — known as intestacy. If you find a copy of a will, you can apply for probate using a “lost will affidavit,” but you’ll need solid evidence of what it said and why the original is missing.
Step 6: Preventing Future Chaos
For everyone still living:
Register your will (it’s optional, but saves headaches).
Tell someone you trust where it’s kept.
Store it properly — not under the dog bed or behind the gin stash.
Because when the time comes, your family doesn’t need a treasure hunt — they need clarity.
